Last week, IBM announced a new analytics appliance it says can crunch petabytes of data in seconds, letting multichannel retailers respond rapidly to shifts in consumer interest.
The new IBM Netezza Customer Intelligence Appliance is part of IBM’s Smarter Commerce offerings to let companies understand buying patterns across multiple channels, including mobile, POS and online shopping.
IBM’s Netezza promise is to allow its clients to run complex, real-time analytics in seconds in order to improve the customer experience, shift marketing campaigns on the fly and boost sales.
Jim Kelly, VP of retail/distribution for IBM Netezza, says the appliance provides two important benefits: speed and data integration.
As far as data integration goes, while the actual appliance is delivered ready to receive the retailer’s data as soon as it’s plugged in, the customer may still have work to do before it can take advantage of the analytics, Kelly says.
“Traditionally, retailers have customer data in silos,” he says, “and point-of-sale data and online data are typically not even integrated with it. That’s step one; then, you have some social media you can attribute to a customer.”
Putting all this together lets marketers identify particular customer segments to discover important insights such as product affinity, allowing them to do tailored promotions to increase sales, as well as to merchandise more effectively in physical stores, he said. For example, a physical retailer could figure out not only whether it’s a good idea to put the cookies next to the chips, but also which size bag of cookies would sell better.
One Customer Intelligence Appliance customer whose name Kelly could not disclose typically ran promotions on jeans to pull customers in. As the price of cotton rose, the retailer could not effectively analyze whether the cheap jeans were pulling in valuable customers or only bargain hunters.
With the product, it was able to determine which customer segment was buying the jeans, what else they were buying and whether that was a segment it wanted to incent.
IBM did not make a customer available for an interview, but a Forrester Research customer analysis of Epsilon, commissioned by IBM, found that the multichannel marketing services company could potentially enjoy a three-year, risk-adjusted return on investment of 222 percent.
The Netezza appliances are optimized systems based on IBM BladeCenter technology and include IBM’s Cognos business intelligence software, as well as IP from business partner Aginity. Retailers can customize the solution based on their own needs. The total cost depends on the size of the Netezza appliance, which is driven by the size of the retailer and its data and analytic needs. It could range from $200,000 to millions of dollars for the largest retailers.
IBM purchased Netezza in September 2010 for $1.7 billion. According to a research note by Forrester analyst James Kobielus, the product competes with offerings from Oracle, Microsoft and Teradata.
Teradata acquired Aprimo for $55 million in December 2010, saying the combination of Teradata’s business analytics and Aprimo’s cloud-based integrated marketing software could provide customers with more strategic analytics and intelligence.
All this activity indicates a hot market for machines to make sense of huge data sets. IBM says it wants a piece of this market that it estimates will grow to a $20 billion opportunity in software alone this year. And a 2011 report by McKinsey Global Institute said that retailers could see a 60 percent increase in their operating margins by taking advantage of big data.